May 4, 2020
9 Ways to Set Children Up for Lifelong Financial Success
Guest Author: Morgen Henderson
It’s never too early to start teaching your child about money, because let’s face it: it’s a huge component of our daily lives. Teaching your child about money management and savings from an early age can help give them the upper hand. It will help them develop good money habits while also teaching them important life skills along the way. Here are some ways you can help set your child up for a lifetime of financial success.
Teach the Value of Savings
Saving is more than just a fundamental money-management skill. It’s a gateway to learning about self-discipline and long-term reward. These are skills that will benefit them in many aspects of life. A $5 spend on candy now sounds great, but help your child understand the importance of waiting a little longer to save for a bigger splurge that will ultimately matter more to them.
Plan for the Best, but Prepare for the Worst
Investing in a children’s life insurance policy can help both parents and children in the long run. While we obviously never want the worst to happen, preparing for less-than-ideal outcomes could save you from having to pay out of pocket for something like funeral expenses. Furthermore, some children’s policies, such as the Gerber Grow Up Plan, have actual cash value and can be used like a savings account to pay for other things on an unexpected rainy day. In the case that a bad day might hit, you’ll be grateful you planned ahead.
Give Them an Allowance
Giving your kids something like a weekly allowance is one of the simplest ways that you can teach them the value of money. It also encourages them to help out around the house. But be careful. Giving your child pocket-money without them having to do anything in return is a recipe for entitlement. Set clear guidelines on what is expected of them, and what is expected of you in return.
Get to Work
Earning money from household chores is a good baseline, but if and when you feel they’re ready, help them expand their earning potential beyond the tasks they should really just be doing anyway. Help them gain self-confidence by working for others. Dog walking, basic yard care, washing cars, or even running a lemonade stand are a few places to start. Remember to keep safety in mind by making sure you can be there if needed, but feel free to step back so they can experience the feeling of entrepreneurship.
Whether we like it or not, the world revolves on credit. Helping your child understand credit and its importance will lay the groundwork for a healthy look on debt down the road. Teach them what it is and, more importantly, how to use it responsibly. It’s important that they know it’s not just free money. Having good credit health is one thing, but racking up debt for “wants” is another. Consider allowing your child to take a small “loan” from you to pay you back over time to teach them in a more hands-on way.
First, make sure that your child knows the difference between a “want” and a “need.” Then you can use the idea of budgeting to help them understand the concept of delayed gratification. Having a plan, whether it be short-term or long-term, can help them stick to their goals and stay motivated on what’s important to them.
Open Up a Bank Account
While you certainly don’t have to hand your kid a debit card, helping them open up their first savings account can be an exciting way to make them feel more like a grown-up, while teaching the importance of both savings and interest. Better yet, have them set aside a little bit of their allowance and specifically designate that for their savings account.
Talk About It
Be open and honest with your child about money, within reason. It’s okay to shed a little light on some of your mistakes as long as you can put a positive spin on things. Using real-world examples as lessons can help them both better understand money, and form a healthier relationship with it.
Give your child the best chance when it comes to becoming financially sound by starting as early as possible. It’s never too soon to learn about money. Talk about it often, use real examples, and help them do it while giving them a sense of independence. By getting a head start on financial skills, you’ll be giving them the advantage you know they deserve.
About the Author: Morge is a business, sustainability, and tech writer from Salt Lake City. When she’s not typing away at a new piece, you can find her exploring the mountains and baking her favorite treats. Find more of her work at https://hendersonmorgend.contently.com/.